December’s economic work conference

CHINA FINANCIAL - Report 21 Dec 2018 by Michael Pettis

Special points to highlight in this issue:
• The annual Economic Work Conference ended today, and Beijing has released the official statement summarizing the event. It said most of the things we expected it to say. In 2019 Beijing will continue to try to walk the impossibly fine line between stimulating the economy and getting control of debt. It will take market reforms seriously and will continue trying to strengthen the private sector.
• But none of the basic issues have changed. Beijing continues to be under tremendous pressure to get debt under control without causing the economy to slow in a disruptive way. What really matters for the Chinese economy over the medium term, in other words, is how debt-servicing costs will ultimately be allocated. Whatever the Economic Work Conference concludes, I expect that the economic policies Beijing does implement next year will be wholly subject to the politics of debt management and, for that reason, very hard to predict. It will be a bumpy year.

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